Special Tax Notice Regarding Rollovers, RI 37-22
This notice contains important Federal income tax and other information
you will need before you decide how to receive your lump-sum payment
from the Civil Service Retirement System (CSRS) or the Federal
Employees Retirement System (FERS). To be of service to our customers,
the Office of Personnel Management has worked with the Internal Revenue
Service to present a general explanation of how P.L. 102-318 affects those
who receive our benefits. However, the IRS remains the authority on tax
matters and questions. Requests for additional or clarifying information
should be directed to them. The official tax publications that govern how
benefits are taxed are referenced at the end of this notice. OPM does not
stock IRS publications. We cannot provide official tax information nor can
we advise individuals on tax matters. The following discussion applies to
the taxable portion of your lump-sum payment.
A taxable payment from the Office of Personnel Management (OPM) that is eligible for
"rollover" can be paid in one of two ways. You can have all or any part of your payment
either (1) paid in a "direct rollover" or (2) paid to you. A rollover is a payment of the
taxable portion of your CSRS or FERS benefit to your individual retirement arrangement
(IRA) or to another employer retirement plan. This choice will affect the tax you owe.
If you choose a direct rollover of the taxable portion --
- Your payment will not be taxable income in the year it is paid, and no income tax will
- Your payment will be made directly to your IRA or, if you choose, to another
employer retirement plan that accepts your rollover.
- Your payment will be taxable income later when you take it out of the IRA or the
employer retirement plan.
If you choose to have the taxable portion of your benefit paid to you --
- You will receive only 80 percent of the payment, because OPM is required to
withhold 20 percent of the payment and send it to the Internal Revenue